Bank Account Protection
in Budgeting & bank accounts
6 replies 143 views
I understand our money in UK banks is protected up to 85K in general, but how do we protect ourselves against a Bank of England 'Buy In' should they wish to take a percentage of our money in a so called crisis? The deeper we get strapped into the seat of digital currency and away from cash, the more digital protection we need.
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What do you mean by a BoE "buy in"?
OP, if things ever got that bad, you can't protect money in banks. But things won't get that bad. And if they did there'd be more to worry about than mere money.
The whole purpose of a Bail In (https://www.bankofengland.co.uk/paper/2021/executing-bail-in-an-operational-guide-from-the-boe) is that the losses from a failing bank are felt by its investors rather than the public purse or depositors. This is an alternative to the state bail outs we saw in the credit crunch where public funds had to be injected because banks were too big to fail but this meant investors were protected from the fails too.
Almost certainly if the Bail In failed to stablise the bank you'd see another bail out before a bank would be allowed to fail and even if it did fail then you have the FSCS protection.
With respect to depositors whose deposits are not fully protected by the FSCS, bail-in would be applied in accordance with the insolvency creditor hierarchy. This sets out the order in which shareholders, creditors and depositors of a company would receive recoveries should a bank be placed into an insolvency process (also referred to commonly as a ‘liquidation’).
In line with the creditor hierarchy, deposits not protected by the FSCS would only be subject to bail-in if losses are so high that subjecting all of the shareholders and a number of debt-holders to bail-in would not be sufficientSo the way to protect yourself, as always, is to keep within the FSCS £85k limit.